I welcome this Inquiry and the opportunity to make a public Submission on a topic that has been addressed now several times by the Australian Parliament. As an expert in international business law, I have made several Submissions to other inquiries related to Australia’s international affairs, including Free Trade Agreements (FTAs) and investment treaties, mostly recently giving evidence to this Senate Committee’s Inquiry into The Trade and Foreign Investment (Protecting the Public Interest) Bill 2014 (the “Anti-ISDS Bill”). In that evidence I remarked that there could be improvements in how Australia approaches FTA negotiations. Due to time and space constraints I make three specific suggestions regarding (a) treaty negotiation process and (b) treaty implementation and review, since both stages are encompassed by this Inquiry’s Terms of Reference.
Asia-Pacific regional architecture
[The following is a longer and un-footnoted draft of a third Policy Digest prepared for a Sydney Southeast Asia Centre joint research project and an ASEAN Secretariat project on consumer protection law.
A. Under-Enforcement of Product Liability Law for Small-Value Claims
Manufacturers can be incentivised to supply safe consumer goods due to market (reputation) mechanisms, public safety regulation, and/or private law (especially potential tort law liability if consumers claim compensation for harm caused by defective products). The first two mechanisms work better if there is a high probability or risk of harm, as public opinion is then easier to mobilize, although public safety regulation is usually only implemented when the potential harm from unsafe goods is also high. Product liability (PL) law is therefore particularly important to incentivise manufacturers of goods that present a lower probability of harm. However, because of costs associated with enforcing PL law – ultimately through the court system – it tends to work best where the harm and therefore compensation amounts are high. Strict liability PL regimes, increasingly common in ASEAN member states, aim to lessen the burden of proof on potential plaintiffs, who no longer have to prove negligence on the part of manufacturers. Accordingly, they can make more feasible this mechanism even for defective products that generate lower levels of harm and compensation amounts.
Nonetheless, strict liability PL law is still often difficult for consumers to invoke, even in developed countries with comparatively good access to court procedures. After all, unsafe products may often just cause consequential loss to other “consumer goods”. (Only a few countries extend strict PL law coverage to consequential losses to non-consumer goods, which tend to be more extensive. ) Even when personal injury results from the defective products, the harm suffered by each consumer may be low even if the aggregated harm is high. (Good recent examples may be Kanebo’s skin-whitening cosmetics, recently recalled throughout Asian markets, or defective foodstuffs – if consumed in small quantities. ) In such situations, each individual consumer will be reluctant to pursue claims through the court system.
Such problems are compounded in developing and even middle-income countries, where courts are under-resourced or face other generic problems, or accessing them still runs counter to prevailing social norms. This helps explain the limited impact of strict liability PL law reforms observed in South East Asia, despite some of those countries going beyond the European Union (EU) substantive law, for example by allowing consumers to claim multiple damages (i.e. more than the actual harm suffered).
The consequent under-enforcement of consumer law in this field is problematic from the viewpoint of economic efficiency as well as broader justice concerns. After all, the basic economic rationale for introducing strict liability for unsafe manufactured products is that consumers lack expertise to assess safety levels. The latter furthermore correlate only weakly with the pricing of such goods (except some that could cause catastrophic losses if risks eventuate, such as automobiles, which tend to subject to minimum public regulatory standards anyway). Even if particularly well-informed consumers are able to differentiate safety levels of various products, they may end up in the hands of third parties. The economic benefits of introducing strict liability PL law to mitigate such problems, by forcing manufacturers to “internalize” the full costs associated with putting goods into the market, is undermined if those substantive laws are inadequately enforced. This is also problematic from the perspective of justice and advancing the rule of law, a major objective particularly in developing countries and for ASEAN.
Product Liability: Complementing Substantive Law Reforms to Enhance Incentives to Supply Safe Consumer Goods
[The following is an un-footnoted draft of a second Policy Digest (also omitting Figures) prepared for a Sydney Southeast Asia Centre joint research project and an ASEAN Secretariat conference on consumer protection law in Hanoi over 8-9 December 2014. The footnoted final version is available at: http://www.asean.org/resources/publications/item/consumer-protection-digests-and-case-studies-a-policy-guide-volume-1?category_id=382]
Consumer product safety failures continue to occur ASEAN states. However, many reported cases involve product sectors that already involve some public regulation (Part 2). For other product types, many states have enacted strict product liability (PL) statutes, aimed at making it easier for harmed consumers to claim compensation and thus providing an additional incentive for manufacturers to supply safe goods (Part 3). Yet PL litigation and claims remain very limited, as in Europe (Parts 4-5). The incentive effect needs to be bolstered by other measures, including improvements in access to justice (Part 6).
[The following is an un-footnoted longer draft of one of two Policy Digests prepared for a Sydney Southeast Asia Centre joint research project and an ASEAN Secretariat conference on consumer protection law in Hanoi over 8-9 December 2014. The footnoted final version is available at: http://www.asean.org/resources/publications/item/consumer-protection-digests-and-case-studies-a-policy-guide-volume-1?category_id=382]
Consumer product safety is a major contemporary concern for developing, middle-income and developed economies. ASEAN, through its Committee on Consumer Protection (ACCP), has recognised this as a priority topic for international collaboration, as trade in goods accelerates through the region with its major trading partners world-wide. Part 2 of this Digest highlights the policy challenge. Part 3 shows how market and even private law incentives are unlikely to provide sufficient incentives for manufacturers to produce safe products; some minimum regulatory standards are needed. Part 4 focuses on regulatory powers to force recalls of unsafe goods, but also requirements for suppliers to notify national regulators about ‘voluntary’ recalls. It also outlines recall information disclosure efforts underway nationally, regionally (notably within the European Union, EU, but also through ACCP since early 2011), and now internationally (especially through the Organization for Economic Cooperation and Development, OECD, since late 2012). This Digest suggests there is scope already for greater engagement by ACCP and individual ASEAN member states particularly with the OECD initiative in this field. Part 5 also urges broader information-sharing as the OECD clearing-house expands over the next few years, as well as with product safety incident reporting systems already developed particularly in the EU and the United States (US).
My public lecture on this topic, bringing together two research fields of contemporary public interest, was presented on 24 September 2014 as part of Sydney Law School's Distinguished Speakers Program.
The session was kindly introduced by my colleague Prof Chester Brown, and ended with a commentary by NUS Asst Prof Jean Ho who kindly arrived straight from Sydney airport after her flight from Singapore.
The audio file of my presentation and Chester's introduction are available via Sydney Law School's podcast channel (specifically here), my Powerpoint slides are here (as a PDF), and a related short paper is here. Below is the abstract (with further hyperlinked references available here) and speaker/commentator bios.
This posting is based mainly on a Note that critically reviews The Trade and Foreign Investment (Protecting the Public Interest) Bill 2014, drawing on my written Submission and subsequent Senate Hearings. The fully footnoted version will appear in the next issue of the CIArb's "Australian ADR Reporter" or successor Journal. Readers may also be interested in my subsequent posting to the Kluwer Arbitration Blog, followed by the Senate Committee Report (27 August 2014) which agreed that the anti-ISDS Bill should not be enacted. Significant extracts from that Report will also be added and analysed in my draft paper at http://ssrn.com/abstract=2483610, with an introduction incorporating a version of the Note below.
This work is part of an Australian Research Council Discovery Project (DP140102526) funded over 2014-2016 jointly with Dr Shiro Armstrong and Professors Jurgen Kurtz and Leon Trakman, which was acknowledged in the Senate Bill hearings and final Report. The topic of ISDS will also be discussed at the Law Council of Australia’s 2014 International Trade Law Symposium, 18-19 September, Canberra, and will be the focus of an ABC National Radio broadcast on 14 and 16 September (with transcripts here).
Do Many of Australia’s (and Some of Japan's) Treaties Not Give Full Consent to Investor-State Arbitration?
Indonesia recently announced that it would review its 67 bilateral investment treaties (BITs). Shortly beforehand, it had unsuccessfully challenged the jurisdiction of an ICSID arbitral tribunal in a claim for expropriation and other violations brought by the Australian subsidiary of a UK coal mining company (Planet Mining v Indonesia).
The tribunal’s decision found that consent to jurisdiction existed under the coal mining licences given by Indonesian authorities, but not under the wording of the 1992 Australia-Indonesia BIT. It found that the countries had only given a “promise to consent” rather than full advance consent to ICSID jurisdiction, meaning that Indonesia could still refuse consent subject to potential review through an inter-state arbitration procedure separately provided under the treaty. Further, as both countries remained party to the framework 1965 ICSID Convention facilitating enforcement of arbitral awards, another BIT provision for ad hoc investor-state arbitration (ISA) was also unavailable to investors.
I am pleased to provide this Submission on The Trade and Foreign Investment (Protecting the Public Interest) Bill 2014. I specialise in international and comparative commercial and consumer law, and have produced extensive academic publications and media commentary on treaty-based investor-state dispute settlement (ISDS). My interest is in the policy and legal issues associated with this system; I have never provided consultancy or other services in ISDS proceedings.
The Bill simply provides, in clause 3, that:
“The Commonwealth must not, on or after the commencement of this Act, enter into an agreement (however described) with one or more foreign countries that includes an investor-state dispute settlement provision.”
The Explanatory Memorandum provides no guidance as to the background to this proposal, or its pros and cons. However it seems to be aimed at reinstating the policy shift announced by the April 2011 “Gillard Government Trade Policy Statement”. That is no longer found on Australian government websites and is inconsistent with the present Government’s policy on ISDS, which allows for such provisions on a case-by-case basis (as evidenced by the recent Korea-Australia FTA).
The Bill, like the previous Trade Policy Statement in this respect, may be well-intentioned, but it is premature and misguided. Treaty-based ISDS is not a perfect system, but it can be improved in other ways – mainly by carefully negotiating and drafting bilateral investment treaties (BITs) and free trade agreements (FTAs). This may also have the long-term benefit of generating a well-balanced new investment treaty at the multilateral level, which is presently missing and unlikely otherwise to eventuate.
The Australian Network for Japanese Law (ANJeL) will host the Cairns Symposium on Japanese Law on Friday 16 May, with special thanks to ANJeL member and James Cook University Associate Professor Justin Dabner. Registration should be completed by emailing your name and institution to firstname.lastname@example.org; registration costs $60 for non-speakers (to cover lunch and teas) and can be paid on the day of the conference (please inform in advance if a receipt is required).
[Updated 26 April] The Symposium's theme is 'Japanese Law and Business Amidst Bilateral and Regional Free Trade Agreements' - by happy coincidence, in light of the conclusion of negotiations for the Japan Australia Economic Partnership Agreement on 7 April 2014 (see media commentary here). However, presentation proposals dealing with other Japanese Law topics were also welcomed, as in previous ANJeL conferences held since 2002. As indicated by Abstracts below, speakers will cover fields including agricultural land law and policy, corporate law reforms, insolvency law and practice, long-term contracting, cross-border investment dispute resolution, tax treaties, emissions trading schemes and political participation rights.
Consumer Protection Law and Practice in South-East Asia: Implications for Regional FTAs and Australia
The Sydney Southeast Asia Centre, with in-kind support from the global law firm Baker & McKenzie, will fund over 2014 this project involving also my colleague specialising in Chinese law, Prof Bing Ling.
[Background] Regional economic integration is proceeding apace. ASEAN aims to completely eliminate tariffs among 6 original (out of 10) member states by 2015, as part of developing an economic, political (security) and socio-cultural “community”. Yet it has also established an ASEAN Committee on Consumer Protection, to avoid a regulatory “race to the bottom” along with this expansion of free trade. Since late 2012, ASEAN has also begun negotiating a “Regional Comprehensive Economic Partnership” (RCEP) with Australia-NZ, Japan, China, Korea and India – leveraging off existing Free Trade Agreements (FTAs) with each of those states. Consumer protection is likely to arise also in the context of RCEP, and even the Trans-Pacific Partnership FTA (with negotiations already well advanced and involving many of the same states).
Australia’s Coalition Government, dominated by the Liberal Party and led by Prime Minister Tony Abbott, recently completed a rocky first 100 days in power. Diplomatic rows with China and Indonesia are only part of the story. The Government stands accused, for example, of sending ‘conflicting messages’ to the business sector. At the Business Council of Australia’s 30th anniversary dinner on 4 December, Abbott reiterated his election-night declaration that Australia was ‘once more open for business’. Yet five days earlier, his Treasurer had taken the rare step of blocking a major foreign direct investment (FDI) – a $3.4 billion bid by US firm ADM for GrainCorp.
"The fundamental importance of foreign direct investment to Australia in the 21st century: Reforming treaty and dispute resolution practice"
The (federal government's) Australian Research Council has provided $260,000 to support this project over 2014-6 (DP140102526), in collaboration with Prof Leon Trakman (lead-CI, former Dean of Law at UNSW), A/Prof Jurgen Kurtz (Melbourne Law School) and Dr Shiro Armstrong (ANU Crawford School of Public Policy, co-editor of the East Asia Forum blog). Below are parts of our original project application to the ARC; an updated and edited version is available at http://ssrn.com/abstract=2362122.
[Abstract] "This project will evaluate the economic and legal risks associated with the Australian Government’s current policy on investor-state dispute settlement through multidisciplinary research, namely econometric modeling, empirical research through stakeholder surveys and interviews, as well as critical analysis of case law, treaties and regulatory approaches. The aim of this project is to identify optimal methods of investor-state dispute prevention, avoidance and resolution that efficiently cater to inbound and outbound investors as well as Australia as a whole. The goal is to promote a positive climate for investment inflows and outflows, while maintaining Australia's ability to take sovereign decisions on matters of public policy."
[Aims] Foreign direct investment (FDI) has become essential to global economic development, with FDI flows exceeding US$1.5 trillion in 2012 (UNCTAD 2012). Australia’s treaty making practice, especially its current policy with respect to investor state dispute settlement (ISDS), may be sub-optimal, in that it is not entirely based on sound economic cost-benefit data and supporting econo-legal research. Australia can potentially increase its share of the global FDI pool by adopting a more efficient approach to formulating policy with respect to ISDS.
This project aims to develop a key policy framework and devise salient institutional structures and processes that take account of two competing pursuits: the cost-benefit advantages of promoting Australia as an FDI destination; and the need to ensure that these advantages are considered in light of competing policy objectives that are not explicated exclusively on economic grounds (as explained in the Background section). This project is valuable and innovative because it identifies significant gaps in the current Australian policy framework and uses interdisciplinary research to address them.
The overall purpose is to ensure that Australia attains its optimal share of the global FDI market in the context of competing policy objectives. As such, the project will evaluate the economic and legal risks associated with the Australian Government’s current policy on ISDS through multidisciplinary research, namely econometric modeling, empirical research through stakeholder surveys and interviews, as well as critical analysis of case law, treaties and regulatory approaches. The general aim is to identify optimal methods of investor-state dispute prevention, avoidance and resolution that efficiently cater to inbound and outbound investors as well as Australia as a whole. The specific purposes therefore are: (1) to investigate policies that underpin Australia’s approach to negotiating international investment treaties, with particular emphasis on its policies on avoiding, managing and resolving investment disputes; (2) to identify and analyse links between these policies and the investment practices of both inbound and outbound investors; and (3) to propose recommendations on alternative approaches to investment policy, so that, through a carefully framed cost-benefit analysis, Australia can retain appropriate sovereignty over public policy issues (such as health and the environment) while promoting a positive economic climate for investment inflows and outflows.
It remains to be seen whether the new Coalition Government will revert to Australia's longstanding treaty practice prior to the 2011 'Gillard Government Trade Policy Statement'. That declared that Australia would not include investor-state arbitration (ISA) protections in future investment treaties - including investment chapters of Free Trade Agreements - even with developing countries.
The new Prime Minister, Tony Abbott, has declared that he is keen to conclude FTAs which Australia has long been negotiating with Japan, Korea and China respectively. The Gillard Government's stance on ISA adding to delays experienced in finalising these treaties - see comments, including some of my own in The Australian on 21 September 2013. It also complicates negotiations for regional agreements like the Trans-Pacific Partnership (TPP) agreement and the Regional Comprehensive Economic Partnership (RCEP).
The ISA system is far from perfect, but there are many ways for Australia to draft provisions in investment treaties - old and new - to balance public and private interests effectively. Examples that attract varying degrees of support, from experts in international investment law, are provided in my paper co-authored with Chris Campbell and Sophie Nappert, forthcoming in a special issue of the Transnational Dispute Management journal. It and some of my other recent papers relevant to this topic, uploaded on SSRN.com, are listed with their Abstracts below.
Catastrophic events are increasingly in the public eye, fuelling a burgeoning but complex field of interdisciplinary research and policy-making worldwide. Recent devastating natural disasters have included the Indian Ocean Tsunami in 2004, Hurricane Katrina in the United States (US) in 2005, Cyclone Nargis in Burma (Myanmar) and the Sichuan Earthquake in 2008. Developed economies have not been spared, as shown by the Christchurch earthquake in New Zealand and Australia’s widespread floods in Queensland in 2011. In particular, the disasters that wreaked havoc from 11 March 2011 in the north-east region of Japan have highlighted the significance and challenges of disaster prevention and management.
Based on the international conference held at Sydney Law School in March 2012, which has also generated a recent mini-issue (No 34) of the Journal of Japanese Law, A/Prof Simon Butt, Dr Hitoshi Nasu and I have co-edited "Asia-Pacific Disaster Management: Comparative and Socio-Legal Perspectives" (Springer, forthcoming November 2013). A manuscript version of our extensive introductory chapter, freely downloadable here, outlines:
(i) what can be encompassed by the terms "disasters" and "disaster management";
(ii) contributions to "disaster studies" from various social sciences as well as domestic and international law perspectives; and
(iii) lessons that can be learned from socio-legal perspectives on recent catastrophes in Asia-Pacific countries, including possibilities for regional and international cooperation in disaster mitigation, relief and recovery.
I was recently interviewed on this topic by NHK World Radio's principal program director, Yutaka Konishi. His main questions and some of my points in response are outlined below. Some of our interview was broadcast on "Radio News in English" on 9 May 2013, at http://www3.nhk.or.jp/nhkworld/english/radio/program/), the transcript of the full interview is here (download PDF file), and my own notes are reproduced below.
Later I was also interviewed in Sydney by TV Asahi specifically about investor-state arbitration (and other ISDS) provisions in the expanded Trans-Pacific Partnership (TPP) negotiations, which Japan has now officially joined. The 14-minute special feature from their "Hodo Station" evening news on 24 May is also available on YouTube, and a video-clip of my edited comments (from 7m30s to 8m5s) can also be downloaded here (11MB .mov file). In the longer interview in Sydney, I reiterated that there is ample scope for this new FTA to include innovative ISDS provisions that appropriately balance the interests of host states (in regulating for the public interest) and private investors (seeking minimum and internationally-accepted legal standards before committing long-term investments). Em Prof Mitsuo Matsushita (former WTO Appellate Body judge) and especially Mr Shigeaki Koga (a former METI official) also emphasised this point in their comments for the Hodo Station special feature. As the TV Asahi website overview pointed out, this topic is now attracting considerable interest in Japan:
Sydney Law School has a close relationship with the East China University of Politics and Law (ECUPL) in Shanghai, which has been teaching a short-term course in Chinese Law for our students for almost 20 years. We also have relationships with many other leading law faculties in China, especially Shanghai Jiao Tong, Wuhan and (in Beijing) Tsinghua, Renmin and Peking universities. USydney LLB and JD law students can apply for semester-length exchanges at all these universities via university-level exchange agreements (except Renmin, for now, and Wuhan), although places are limited as students from other USydney faculties also apply for exchanges.
Angelica McCall, a final-year LLB student, reports below on her experience in the short-term Chinese Law course offered at ECUPL. She also enjoyed taking the short-term "Sustainable Development Law in China" course offered generally every second year in Wuhan, and in June will be attending an international law students forum hosted by Renmin University.
As well as semester-length exchange opportunities, such as those described by Ganesh Vaheisvaran (presently at Yonsei University in Korea), Sydney Law School has already started to meet the challenge of 'Australia in the Asian Century' by developing short-term offshore courses in various Asian countries.
Jenny Han, a final-year LLB student with a BA (Hons) in Japanese Studies, first reports below on two experiences in Japan. The Kyoto/Tokyo Seminars in Japanese Law are offered for credit to LLB/JD and Masters students over 10 days every February, to Japanese, Australian and other international students. Participation in the INC negotiation and arbitration competition in Tokyo usually attracts course credit (within the 'International Moot' LLB/JD unit), although Sydney Law School is moving towards fielding a team every two years (recommencing in the December 2015 moot). We are very grateful for financial supporters of these opportunities for closer engagement with Japan, especially Mr Akira Kawamura (LLM 1979, former President of the International Bar Association) and Mitsui Matsushima Australia Pty Ltd.
Glenn Kembrey then adds some remarks on his student exchange at Kobe University. He enjoyed it so much that he extended his stay beyond one semester (needed to complete his USydney LLB degree), studying in Kobe for another semester to hone his skills in comparative law.
The Australian government is slowly following up on the agenda set out in last year's 'Australia in the Asian Century' White Paper. An Implementation Plan has now been announced, along with an expanded Strategic Advisory Board, and public Submissions are sought on follow-up individual country strategies (by 31 May) for Japan, China, Indonesia, India and South Korea.
Of particular interest for Australian universities and their students, on 6 April the first round of applications opened for 'AsiaBound' study - with a deadline of 20 May 2013. The government had already announced on 31 October 2012, albeit in broad terms, the $37 million AsiaBound Grants Program:
AsiaBound provides funding in the form of $2000 or $5000 grants for around 3600 Australian students each year to participate in a study experience in Asia. Students are able to undertake short-term mobility for a variety of experiences including practicums, clinical placements, research trips or volunteer projects for up to 6 months. Students are also able to undertake semester based experiences for one or two semesters. In addition to study grants, AsiaBound offers grants of $1000 for preparatory Asian language study that can be undertaken prior to or concurrently with an approved mobility project.
Increase the overall number of Australian students with a first-hand study experience of Asia through funding for short-term study and language grants as well as increased OS-HELP loans
Encourage more students to become Asia-literate by supporting institutions to diversify their mobility offerings in Asia
Enhance the skills and expertise of Australians through access to a variety of study opportunities in Asia
Support increased Asian language competency of Australian students together with mobility experiences
Increase collaboration and partnerships between Australian and Asian higher education and vocational institutions.
Hopefully this program will further encourage Sydney Law School student engagement with the fascinating world of law in Asia. Already they enjoy opportunities for short-term offshore courses in Japan (every February), China, Malaysia/Indonesia and Nepal. Our law students also have also competed successfully since 2005, as part of 'Team Australia' with ANU students, in the Intercollegiate Negotiation and Arbitration competition (INC) held in Tokyo each December. There is also growing interest in semester-length offshore exchanges to leading law schools in Asia, thanks to efforts to expand university- and faculty-level student exchange agreements (traditionally focused more on Europe and North America) as well as the growing numbers of law courses offered in English by partner institutions in the region. The government's new 'AsiaBound' funding should further increase the attractiveness of these opportunities.
Already, our law students are taking the plunge. An example is Ganesh Vaheisvaran, who mooted at the INC in Tokyo (in the English-language division in 2011, and in the Japanese-language division last year). He is now spending a semester at Yonsei University in Seoul, thanks to a university-level student exchange agreement reinforced by a new faculty-level MOU. As you can read from the report below, Ganesh is obviously enjoying his Korean law and language studies - as well as some interesting extra-curricular activities!
Negotiating and Applying Investor-State Arbitration Provisions in Free Trade Agreements and Investment Treaties: Australia, Japan and the Asia-Pacific
My recent Sydney Law School Research Paper No. 12/84, forthcoming in a special issue 119 (9&10) Hogaku Shimpo (Chuo University) for Professor Satoru Osanai, is an edited and updated collection of postings over 2012 on this 'Japanese Law and the Asia-Pacific' blog (and/or the East Asia Forum blog) dealing with investor-state arbitration (ISA) and other forms of investor-state dispute settlement.
The topic has become particularly controversial for Australia, given its ongoing Free Trade Agreement negotiations with Japan. Japan is also considering joining negotiations underway among Australia and 10 other states (including the US) for an expanded Trans-Pacific Partnership Agreement, and both are also interested in the more recent 'Regional Comprehensive Economic Partnership' (RCEP) initiative (ASEAN+6). Both Japan and Australia have almost always included ISA protections in their investment treaties, but Australia omitted them in investment treaties with the USA and New Zealand, and recently declared that it will no longer accept ISA in future treaties – even with countries with less developed legal systems and economies.
Some are concerned about treaty-based Investor-State Dispute Settlement (ISDS), especially binding Investor-State Arbitration procedures in investment treaties and Free Trade Agreements. One response includes public calls for states to eschew such procedures completely in future treaties, for example in the expanded Trans-Pacific Partnership Agreement presently under negotiation. This approach would essentially leave foreign investors to approach local courts if host states illegally interfere with their investments, or to encourage their home states to activate an inter-state dispute resolution process, or to try to negotiate individualised arbitration agreements with host states.
An alternative approach is to identify and address more specific concerns with treaty-based ISDS. An example is the scoping paper and Public Consultation on ISDS generated by the Organisation for Economic Cooperation and Development, over 16 May – 23 July.
As a constructive contribution to this debate, we created an online form asking for views on whether ISDS should be left as is, abandoned completely, or adapted in various listed ways. As explained below, no respondents favoured eschewing ISDS completely. Yet that position represents the policy shift announced by Australia in the "Gillard Government Trade Policy Statement" (April 2011), resulting in ISDS being omitted from the Australia-Malaysia FTA (May 2012) but difficulties in negotiating other bilateral treaties (with Korea, and Japan) and the TPPA. Implications and other topics related to the TPPA negotiations will be discussed at a Roundtable in Canberra on 8 August, hosted by the Crawford School of Public Policy (ANU College of Asia and the Pacific).
As NZ lawyer Daniel Kalderimis points out recently, concerns about treaty-based investor-state arbitration (ISA) have been:
stirred up by the release of an “Open Letter from Lawyers to the Negotiators of the Trans-Pacific Partnership Urging the Rejection of Investor-State Dispute Settlement” on 8 May 2012. The letter is backed by well-meaning, and several well-known, signatories; most of whom are not especially well-informed about investor-state arbitration. The fact of the letter is welcome, as the issues are important. But the letter itself contains several overstatements and does not make a balanced contribution to the debate.
Another oddity about the "Open Letter" is that it refers generically to "Investor-State Dispute Settlement" (ISDS) and ends by calling on "all governments engaged in the TPP [Trans-Pacific Partnership FTA] negotiations to follow Australia’s example by rejecting the Investor-State dispute mechanism and reasserting the integrity of our domestic legal processes". ISDS incorporates both ISA (where the parties agree to be bound by the arbitrators' decision) and investor-state mediation ("ISM") or conciliation procedures (where the parties agree to negotiate a settlement but are not obliged to accept any proposals made by the third-party neutral mediator). At least the rest of the "Open Letter" indicates that the primary objection is to binding ISA.
By contrast, the "Gillard Government Trade Policy Statement" (April 2011) simply eschews ISDS in Australia's future treaties, including the TPP. Perhaps the Statement meant only ISA, which allows greater inroads into host state sovereignty, given that overall it draws on the Productivity Commission's recommendations from a 2010 Trade Policy Review report. But, by seemingly eschewing all forms of ISA, the Statement seems to go beyond the Commission's recommendation on ISA itself.
Hopefully the Australian government, other states involved in FTA negotiations (such as the TPP) and those who wish to improve the ISA system (such as myself) or abandon it altogether (as do some signatories to the Open Letter) will not simply transpose their objections over to ISM too. There is significant scope for mediating investor-state disputes, and indeed the Draft Rules on ISM published recently by the International Bar Association (IBA) are a valuable guide to conducting mediation more effectively. Below I set out some preliminary analysis of those Draft Rules, prepared for the Law Council of Australia but representing my own personal views - particularly regarding the scope for arbitrators to adopt them as a means of settling ISA claims earlier and more effectively (ie 'Arb-Med'). A fully-footnoted version of my views is available on request, and I encourage feedback.
Professor Vivienne Bath and myself are guest editors and authors of two articles for this special issue, the first dedicated the Sydney Law Review to developments in or across Asian legal systems. The issue also includes an article on Indonesian law co-authored by Dr Simon Butt, presently serving as Director of the Centre for Asian and Pacific Law at the University of Sydney (CAPLUS).
The special issue contains the following nine contributions, with full-text PDF versions freely downloadable from the Sydney Law Review webpage:
Introduction: Asian Investment and Finance Law
Vivienne Bath and Luke Nottage
Corporate Rescue in Asia - Trends and Challenges
Lessons from Product Safety Regulation for Reforming Consumer Credit Markets in Japan and Beyond?
Luke Nottage and Souichirou Kozuka
Embracing Sharia-Compliant Products through Regulatory Amendment to Achieve Parity of Treatment
Kerrie Sadiq and Ann Black
Between Piety and Prudence: State Syariah and the Regulation of Islamic Banking in Indonesia
Reining in Regional Governments? Local Taxes and Investment in Decentralised Indonesia
Simon Butt and Nicholas Parsons
Foreign Investment, the National Interest and National Security - Foreign Direct Investment in Australia and China
Responding to Industrial Unrest in China: Prospects for Strengthening the Role of Collective Bargaining
The Influence of the WTO over China’s Intellectual Property Regime
Natalie P Stoianoff
Book Review: The Derivative Action in Asia: A Comparative and Functional Approach [edited by Harald Baum, Dan Puchniak and Michael Ewing-Chow, Cambridge University Press, 2012]
Luke Nottage and Fady Aoun
Vivienne Bath and I also reproduce below the text of our Introduction (omitting footnote references). It outlines and commemorates the long and strong tradition of engagement with Asian legal systems on the part of Sydney Law School, CAPLUS and the Australian Network for Japanese Law (ANJeL).
Divestment of foreign mining interests in Indonesia meets the ‘Gillard Government Trade Policy Statement’
By: Simon Butt and Luke Nottage (University of Sydney Law School)
[with a shorter version at http://www.eastasiaforum.org/]
Professor Chris Findlay recently wrote on the East Asia Forum about ‘Australia’s FDI challenges in the Asian Century’, highlighting problems reported recently by ANZ Bank and Qantas in the region. His proposals including ‘innovation in negotiating modalities’, including a possible new plurilateral agreement in the WTO that would cover all investments (not just in some services sectors). That’s a nice idea, but it’s proving hard enough to complete the current round of Doha Round negotiations. In light also of recent problems in Indonesia, the Australian government should meanwhile reconsider its abrupt policy shift last April regarding an important protection found in most of its bilateral and regional Free Trade Agreements (FTAs) and bilateral investment agreements (BITs): investor-state arbitration (ISA).
Like so many in Australia and worldwide, we remember sadly today over 19,000 confirmed dead or still missing from Japan’s triple disasters a year ago. Our thoughts and prayers also go out to the many more who collectively have lost their lives from natural disasters in other parts of the Asia-Pacific – including the 2004 tsunami in Indonesia and other countries facing the Indian Ocean, the 2008 earthquake in Sichuan, the Christchurch earthquake and the Queensland floods – just over a year ago, too.
ANJeL Anniversary Conference (Asia-Pacific Disaster Prevention and Management): Opening Remarks (for 1 March)
On behalf of the University of Sydney, please let me welcome you all to this international conference, on ‘Socio-legal norms in preventing and managing disasters in Japan: Asia-Pacific and interdisciplinary perspectives’, by acknowledging the many people and organizations that have made it possible. I thank especially our many speakers, session chairs and other participants here today – including Consul-General Kohara (who will soon add a few words to open the conference) and several others who will be joining us later (by Skype from Japan and the US, as well as the Federal Minister for Emergency Services and Adelaide University’s new Pro Vice-Chancellor (Int’l) Professor Kent Anderson, who will give closing speeches tomorrow).
I also gratefully acknowledge our main sponsor, the Japan Foundation Sydney, which last year requested applications for joint research events on this important topic; and the other participating institutions – the Law Faculty of Tohoku University (one of USydney’s longstanding partners in Japan) and various USydney-related organisations that have come together to provide matching funding: the Law School and its Centre for Asian and Pacific Law (CAPLUS), the Australian Network for Japanese Law (ANJeL, centred on the Law Schools at USydney, ANU and Bond University), the new China Studies Centre, the Department of Japanese Studies, and the Office of the Deputy Vice-Chancellor (Int’l).
May I also single out our fine administrative support staff: Dale Nouwens (Law School Events Coordinator) and Melanie Trezise (ANJeL Executive Coordinator). I truly appreciate their help, especially as I will need to step outside this conference occasionally over the next few days. As the relevant Associate Dean, I also need to keep an eye on the Orientation Program for new International Students in the Law School, which will be taking place in parallel in the lecture theatre across the corridor.
Anniversary Conference, 1-2 March 2012: "Socio-legal Norms in Preventing and Managing Disasters in Japan: Asia-Pacific and Interdisciplinary Perspectives"
The "3-11 triple disasters" that afflicted Japan on 11 March 2011 have highlighted broader regulatory issues facing countries particularly in the Asia-Pacific region, including Japan's FTA negotiation program. A few months after "3-11", the Japan Foundation established a special grant program calling for collaborative research conferences on disaster prevention and management - seeking applications by end-September, with decisions to be reached by end-October and conferences to be concluded by March 2012. An application by a consortium led by the University of Sydney Law School was successful, allowing a major international conference to take place in the new Sydney Law School premises over Friday 1 March and Saturday 2 March 2012. Other sponsors of this event are the University's Japanese Studies Department and the new China Studies Centre, the Centre for Asian and Pacific Law at the University of Sydney (CAPLUS), the Australian Network for Japanese Law (ANJeL), and the Law Faculty of Tohoku University (one of the University of Sydney's longstanding partner institutions).
The conference will commemorate the first anniversary of the 3-11 disasters, and also represents ANJeL's tenth international conference on diverse aspects of Japanese Law. It will examine regulatory issues from a variety of social science perspectives, focusing on Japan but comparing Australia (of course, especially in the wake of January's devastating floods in Queensland), New Zealand (especially issues highlighted by the Christchurch earthquake), Indonesia (the Aceh tsunami), China and the USA (especially earthquakes and nuclear power issues).
Guest Blog - "Tax Treaty Arbitration: The Next Frontier in Asia-Pacific Commercial Dispute Resolution?"
[This guest blog by Micah Burch, Senior Lecturer at Sydney Law School, draws on our joint research for the project, "Fostering a Common Culture in Cross-Border Dispute Resolution: Australia, Japan and the Asia-Pacific", supported by the Commonwealth through the Australia-Japan Foundation which is part of the Department of Foreign Affairs and Trade. We have subsequently co-authored a related paper entitled "Novel Treaty-Based Approaches to Resolving International Investment and Tax Disputes in the Asia-Pacific Region" (October 4, 2011) Sydney Law School Research Paper No. 11/66, available here.]
Much was made (in tax treaty circles, at least) three years ago when, after decades of mounting discussion, the Organisation for Economic Co-operation and Development (OECD) included in its model tax treaty a provision requiring arbitration. The controversial provision (Article 25(5) of the OECD Model Tax Convention on Income and on Capital (2003)) takes the substantial step of requiring states to arbitrate tax disputes arising under the treaty if they remain unresolved after two years of negotiation between the two competent authorities. While arbitration is a generally accepted facet of international commercial dispute resolution worldwide, including now throughout Asia, dispute resolution under bilateral tax treaties has been relatively undeveloped. But there are now signs of change.
[Updated 3 August 2011]
Justice Oliver Wendell Holmes famously remarked in Northern Securities Co v United States 193 US 197 (1904) that:
“Great cases like hard cases make bad law. For great cases are called great, not by reason of their importance... but because of some accident of immediate overwhelming interest which appeals to the feelings and distorts the judgment”.
We might take this reasoning a step further: big cases make or entrench bad policy. A contemporary example is the request for arbitration (in Singapore) initiated on 27 June by tobacco giant Philip Morris Asia (PM) against Australia, pursuant to the 1993 “Agreement between the Government of Australia and the Government of Hong Kong for the Promotion and Protection of Investments”. PM seems to be alleging that proposed legislation mandating plain packaging of cigarettes amounts to “expropriation” of its trademarks (Art 6) and possibly a violation of “fair and equitable treatment” obligations (Art 2(2)).
The Rise and Possible Fall of Investor-State Arbitration in Asia: A Skeptic’s View of Australia’s “Gillard Government Trade Policy Statement"
Downloadable here is my draft paper on this topic for various forthcoming events, beginning with a 3 August seminar hosted by Sydney Law School on "Australia's New Policy on Investor-State Dispute Settlement".
The paper draws on research for the project, 'Fostering a Common Culture in Cross-Border Dispute Resolution: Australia, Japan and the Asia-Pacific', supported by the Commonwealth through the Australia-Japan Foundation which is part of the Department of Foreign Affairs and Trade.
Treaty-based investor-state arbitration (ISA) has gradually become a more established part of the legal landscape in the Asian region. But this development is threatened by the 'Gillard Government Trade Policy Statement' announced in April 2011.
Drafting Arbitration Clauses to Minimise Costs and Delays in International Commercial Arbitration: An Asia-Pacific Perspective
[This is the outline of my presentation at the Chartered Institute of Arbitrators Asia-Pacific Conference 2011, in Sydney over 27-28 May. (A PDF version including full references and hyperlinks can be downloaded here.) It draws on research for the project, 'Fostering a Common Culture in Cross-Border Dispute Resolution: Australia, Japan and the Asia-Pacific', supported by the Commonwealth through the Australia-Japan Foundation which is part of the Department of Foreign Affairs and Trade.]
Concerns about growing delays and (especially) costs in International Commercial Arbitration (ICA) have spread from West to East:
Advantages of ICA over Cross-Border Litigation (‘East’ vs ‘West’)
Response: ‘highly relevant’ or ‘significant’(* Statistically significant at 99% confidence level)
Region of Practice: East (Ali study ‘06) West (CBU ‘94)
Forum’s neutrality 88 (%) 78 (%)
Forum’s expertise 83 76
Results more predictable 36 42
Voluntary compliance* 42 24
Treaties ensure compliance abroad 85 69
Confidential procedure* 76 56
Limited discovery 47 56
No appeal 64 58
Procedure less costly 36 20
Less time consuming* 57 35
More amicable 52 35
This is also a major and longer-standing concern about Japanese corporations, for example, which explains why they still do not contest many ICA cases (even at the JCAA) despite increasingly incorporating arbitration clauses in cross-border contracts. The ICC, which has a growing Asia-Pacific caseload, has produced a useful Report suggesting various means to manage costs and delays. Yet the ICC distinguishes itself as a ‘high-quality, high-cost’ arbitral venue, evidenced eg by the hands-on service provided by its Secretariat and its ‘Court of Arbitration’. My presentation therefore proposes measures that are often more radical, and which may be particularly suited for ICA involving Australian and Asian parties.
International Commercial Arbitration: An Asia-Pacific Perspective, by Simon Greenberg, Christopher Kee & Romesh Weeramantry, Cambridge University Press, Melbourne, 2011, 543pp + xxxvii tables: ISBN 9780521695701. Softcover A$120.
This book provides a comprehensive and in-depth overview of the law and practice of international commercial arbitration. It is the first work written by Australian experts that offers “an Asia-Pacific perspective” on a field that has burgeoned particularly in Asia and world-wide since the 1990s, following significant liberalisation of cross-border trade and investment. The book’s focus is more on “Asia” than the “Pacific”. It concentrates especially on arbitration law and procedural rules in Australia (including, briefly, the July 2010 revisions to the International Arbitration Act), mainland China and Hong Kong, India, Malaysia, New Zealand, the Philippines and Singapore, with reference also to Indonesia, Japan and the Republic of Korea. It also discusses developments in the United States, and to a lesser extent Canada, as well as in traditional “core” venues in Europe for international arbitration such as England and France.
After an “introduction to international arbitration and its place in the Asia-Pacific” (ch1), chapters cover all main areas of law relevant to drafting arbitration agreements, operating arbitration proceedings, and enforcing awards:
• “the law governing the arbitration and role of the seat” (ch2), “applicable substantive law” for the underlying disputes (ch3), formal and substantive requirements for the “arbitration agreement” itself (ch4);
• establishing or challenging “arbitral jurisdiction” (ch5), appointing or challenging “the arbitral tribunal” (ch6), “procedure and evidence” (ch7, including a helpful Table, at pp319-22, comparing approaches typically associated with civil law or common law traditions in civil procedure);
• “the award: content and form” (ch8) and its “challenge and enforcement” (ch9).
The book also adds a succinct introduction to “investment treaty arbitration” or investor-state arbitration (“ISA”: ch10). This is an increasingly important topic in the Asia-Pacific region – including Australia, where in April 2011 the “Gillard Government Trade Policy Statement” proclaimed that Australia would no longer include ISA in its investment treaties or Free Trade Agreements if this offered foreign investors more rights than local investors. This policy Statement reflects a recommendation of the Productivity Commission finalised last December, which I have criticised on this blog as well as on the East Asia Forum.
Guest Blog - Enhancing Transparency and Earlier Resolution of Trade Disputes: Australia, Japan and the WTO
[This blog by my colleague Dr Brett Williams is based on his research for our project, 'Fostering a Common Culture in Cross-Border Dispute Resolution: Australia, Japan and the Asia-Pacific', supported by the Commonwealth through the Australia-Japan Foundation which is part of the Department of Foreign Affairs and Trade.]
As part of this project on possible dispute settlement provisions that could be incorporated into an Australia Japan Free Trade Agreement, Dr Brett Williams is working on papers suggesting two innovations that could be incorporated into the provisions for inter-state dispute resolution regarding alleged violations of market access commitments. Both of these innovations would enhance the transparency of the issues at stake in the potential dispute, and potentially promote earlier and more cost-effective dispute resolution.
One important further aspect of both of these possible innovations would be that they would be capable of being incorporated into the WTO dispute settlement procedure. Both Australia and Japan have long traditions of support for the multilateral trading system and both have a keen interest in being active players in enhancing and improving the system. Therefore, in suggesting these innovations for possible incorporation into an Australia Japan FTA, Dr Williams also considers whether Australia and Japan could use the FTA as a way of trialling some procedures which could later be the subject of a joint proposal by Japan and Australia to amend the WTO dispute settlement procedure. Neither of the proposed innovations are particularly contentious in their concept but there could be some contention about the practical aspects of implementing them.
[This is based on research for the project, 'Fostering a Common Culture in Cross-Border Dispute Resolution: Australia, Japan and the Asia-Pacific', supported by the Commonwealth through the Australia-Japan Foundation which is part of the Department of Foreign Affairs and Trade.]
The Australian Government’s Productivity Commission (PC) released on 13 December its Research Report on Bilateral and Regional Trade Agreements (BRTAs). Recommendation 5 of the Draft Report in July had suggested that BRTAs (including International Investment Agreements or IAAs) should include Investor-State Dispute Resolution (ISDS) only if Australia’s counterpart country has a relatively underdeveloped legal system, and more generally only if foreign investors did not obtain more expansive protections than domestic investors. Following criticism of some factual errors and various arguments included in the Draft Report, the PC convened a policy workshop for officials, academics (including myself) and other stakeholders. Some views expressed there are partly reflected in the longer and somewhat better-argued section on ISDS now found in the final Report (at Part 14.2, pp265-77). Unfortunately, however, there remain serious problems with the analysis, which includes the following Findings by the PC:
'1. There does not appear to be an underlying economic problem that necessitates the inclusion of ISDS provisions within agreements. Available evidence does not suggest that ISDS provisions have a significant impact on investment flows.
2. Experience in other countries demonstrates that there are considerable policy and financial risks arising from ISDS provisions.'
Below I focus on the implications of this approach. They are particularly acute for Australia’s present negotiations for a Free Trade Agreement (FTA) with Japan, for accession to the Trans-Pacific Partnership Agreement (TPP, which Japan is also interested in joining), and for developments more generally within APEC and at the multilateral level
Fostering A Common Culture in Cross-Border Dispute Resolution: Australia, Japan and the Asia-Pacific
This is the title of a project funded by the Australia-Japan Foundation over 2010-11 for myself and Sydney Law School colleagues, Dr Brett Williams and Micah Burch, which will consider the scope for both countries to develop greater common ground in cross-border dispute resolution law and practice, to facilitate bilateral, regional and even multilateral economic integration. Australia and Japan have recently amended their Double-Tax Treaty and are now negotiating a Free Trade Agreement (FTA). Former Prime Ministers Kevin Rudd and Yukio Hatoyama floated the idea of a broader "Asia Pacific Community" or "East Asian Community", not limited to matters conventionally found in FTAs. The project will look at the possibility of adding:
(a) novel inter-state arbitration mechanisms, namely for:
(i) disputes about interpretation of Double Tax Treaties, a process triggered by taxpayer in a state (which must then obtain a decision from arbitrators binding on both states) and now envisaged since the 2005 revisions to the OECD Model Tax Treaty;
(ii) disputes about market access for goods and services (including typically some forms of investment), usually modelled on provisions set out in the 1994 Dispute Settlement Understanding of the World Trade Organization (itself under review, with considerable leadership from Australia);
(b) appropriate mechanisms for disputes involving a broader array of investments, in response to discriminatory or other illegal treatment from the host state, allowing investors to bring arbitration proceedings directly (often now provided in FTAs and bilateral investment treaties or "BITs") instead of via appeals to their home state for inter-state dispute resolution;
(c) provisions or measures to improve commercial arbitration law and practice for the resolution instead of business-to-business disputes, achieved through commitments that might also be entrenched through treaties, but potentially instead through parallel legislation in each state, or through common Rules or agreements among the main Japanese and Australia arbitral institutions).
The project will also involve Professor Tatsuya Nakamura, former ANJeL Research Visitor and General Manager in the Japan Commercial Arbitration Association, and anyone willing to share experiences or views in these three fields (particularly in Australia or Japan) is very welcome to contact me at first instance.
On 11 March, the Japan Foundation hosted a lecture at Blake Dawson's offices in Sydney entitled ‘Japan at a Foreign Policy Crossroads: New Direction or More of the Same?’ by Kyoko Hatakeyama, a former official in Japan's Foreign Ministry who recently completed her doctorate under the supervision of Professor Craig Freedman at Macquarie University. She discussed the possible changes in Japanese foreign policy under the new government led by the Democratic Party of Japan (DPJ), and the lecture included the launch in Australia of ‘Snow on the Pine: Japan’s Quest for a Leadership Role in Asia’, a book based on her thesis and co-authored with Dr Freedman. Here are some notes subsequently provided by Dr Hatakeyama, setting a broader context for many postings and comments on this Blog.
Imagine an international regime with these institutional features:
1. Virtually free trade in goods and services, including a "mutual recognition" system whereby compliance with regulatory requirements in one jurisdiction (eg qualifications to practice law or requirements to offering securities to the public) basically means exemption from compliance with regulations in the other jurisdiction. And for sensitive areas, such as food safety, there is a trans-national regulator.
2. Virtually free movement of capital, underpinned by private sector and governmental initiatives.
3. Permanent residence available to nationals from the other jurisdiction (and strong pressure to maintain flexible rules about multiple nationality).
4. Treaties for regulatory cooperation, simple enforcement of judgments (a court ruling in one jurisdiction is treated virtually identically to a ruling of a local court), and to avoid double taxation (including a system for taxpayer-initiated arbitration among the member states).
5. Government commitment to harmonising business law more widely, eg now for consumer and competition law.
No, the answer is not the obvious one: I am NOT talking about the European Union (EU). I am referring to the Trans-Tasman framework built up between Australia and New Zealand, particularly over the last decade, sometimes through treaties (binding in international law) but sometimes in softer ways (eg parallel legislation in each country). And since both countries are actively pursuing bilateral and now some regional Free Trade Agreements (FTAs), especially in the Asia-Pacific region, can't at least some of these Trans-Tasman initiatives become a template for a broader "Asia Pacific Community"?
This question is particularly timely as the new DPJ-led government in Japan, has declared its support not only for the WTO system but also for FTAs, particularly in the Asian region. It also advocates improvements in food and consumer product safety measures. Whether or not Australia is considered part of Asia, either by Japan or itself, the two countries are continuing bilateral FTA negotiations in the context of growing involvement in regional arrangements in the Asia-Pacific region. Such developments constitute one theme at the NZ Centre for International Economic Law conference, “Trade Agreements: Where Do We Go From Here?”, over 22-23 October 2009 in Wellington. Below is an edited introduction to my four-part paper, now available in further updated form as a Sydney Law School Research Paper. Powerpoint slides are also available in PDF here.
Emeritus Professor Peter Drysdale recently presented in Sydney a preview of his now-published consultancy report for Austrade, which urges (p3):
“a paradigm shift in thinking about Australia’s relationship with the Japanese economy. The Japanese market is no longer confined to Japan itself. It is a huge international market generated by the activities of Japanese business and investors, especially via production networks in Asia. It is a market enhanced by the economic cooperation programs of the Japanese government throughout the developing world, particularly in the Asian and Pacific region. And it is a market in which Japanese business now plays an increasingly important role from an Australian base in manufacturing, agriculture and services.”
The Australian Financial Review now confirms that Japan has led China and other Asian investors into Australia over the last year (“What Crisis? Asian Investors rush to our shores”, 24 September 2009). But many probably remain unaware of these facts highlighted by Drysdale’s report (pp 3-4):
“The stock of Japanese investment in Asia amounted to A$ 180 billion out of Japan’s global investment of A$ 772 billion at end-2008. The flow of export and import trade which Japanese business generates in Asia each year was US$ 690 billion in 2008. Procurements through Japanese corporate subsidiaries in Asia amount to A$ 1.2 trillion annually. In addition, Japan spent A$ 11 billion (901 billion yen) in Asia on Overseas Development Assistance programs and procurement through economic cooperation programs. Japanese business has now also established a platform for export to the region from Australia, with diversified investments across food, manufacturing as well as resources, that already delivers A$ 6 billion in Australian sales to Asian markets other than Japan. These are all large new elements in the economic relationship with Japan beyond the A$ 51 billion export trade and A$ 20 billion import trade that Australia already does each year with Japan itself.”
These pervasive economic ties are underpinned by very wide-ranging and stable relations between Australia and Japan at all sorts of levels: governmental, judicial, educational, working holidays, and so on. As pointed out in another recent report “Australia and Japan: Beyond the Mainstream”, by Manuel Panagiotopolous and Andrew Cornell for the Australia Japan Foundation, the GFC has led policy-makers as well as businesspeople to look again more favourably on relationships that combine lower risk with less return, compared to high risk/return ventures.
We can take advantage of these strong and still very profitable Australia-Japan bilateral relationships, as well as the investment and trading links each country (especially Japan) has developed in other parts of Asia particularly since the 1990s, by more actively joining Australian and Japanese partners for ventures throughout Asia. This spreads the risks typically associated with the possibility of higher returns, and also allows each partner to contribute goods or services in which that country has more of a comparative advantage. Thus, for example, Drysdale suggests (p25):
“partnership with Australian services firms in finance, legal services and engineering could be mutual productive. … In FTA talks with Japan the Rudd Government is trying to open the way for professional and financial services firms to set up in Japan, encouraging wider recognition of qualifications and the removal of barriers to obtaining licences in Japan”.
As an example of “legal and consultancy services”, Drysdale mentions that several Australian law firms have long experience in the Asian region, and gives the example of Mallesons Japan. But he concludes that “if we are serious about joining global supply chains and capturing service industry opportunities in Asia then Australian firms need to be there on the ground to capture the business”.
Mr Akira Kawamura is senior partner in Anderson Mori & Tomotsune (AMT), one of Tokyo’s “big four” firms - each of which now has around 400-500 lawyers, compared to around 50 just a decade ago. He is also Vice-President of the International Bar Association (IBA), a federation of law societies from 136 countries comprising over 20,000 members world-wide. Kawamura-sensei is also one of Sydney Law School’s distinguished alumni, obtaining an LLM here in 1979, and he is a founding Advisor to the Australian Network for Japanese Law (ANJeL) as well as a generous donor for the ANJeL Akira Kawamura course prizes in Japanese Law. On 21 September he visited the new Law School building and spoke with staff and students about global legal practice, developments in Japan, and the work of the IBA.
Peter Drysdale’s weekly editorial for the East Asia Forum, along with related postings to that blog and enormous media attention in Australia and elsewhere, focuses ‘on the continuing detention of Rio Tinto executive, Stern Hu, in Shanghai on allegations of espionage’. Drysdale signposts some future analysis of ‘the legal framework under which Hu’s detention has taken place’. He also emphasises that we need ‘a cooperative framework—bilaterally, regionally and globally‘ for ‘China’s authorities to avoid damage to the reliability of markets and for Australia to avoid the perception of investment protectionism’. The most pressing legal (and diplomatic) issues concern China’s criminal justice system, especially when ‘national security’ is allegedly involved. But we need already to consider some broader ramifications, including how we think about FDI legislation and (increasingly intertwined) investment treaty protections.
In short, most agree that the Chinese government got annoyed when Australia itself invoked national security interests to restrict Minmetals bid for OZ Minerals back in March 2009. Then it got really annoyed when Chinalco’s bid for Rio Tinto fell through, even though the Australian government wasn’t directly involved. And so, one story goes, Stern Hu has been arrested to send a message – in the hope that Australia (and other potential host states) will be think twice before invoking national security exceptions to restrict future FDI from China. The China-watchers are better placed to decide whether this is really the motivation behind his arrest. My point here is rather that we should not be surprised that host states may be increasingly tempted to invoke exceptions to limit FDI at the outset, which in turn generates risks of (over-)reactions by home states, as we may be witnessing in Hu’s case. And the initial temptation may arise due to proliferating investor-state arbitration provisions in investment treaties, because those later restrict their room to invoke national security or other limits once the FDI has been approved.
Dr Malcolm Cook and Mr Andrew Shearer at the Lowy Institute in Sydney published last month a short analysis entitled Going Global: A New Australia-Japan Agenda for Multilateral Cooperation:
‘To help both governments navigate [a] more complicated and uncertain international environment, the paper offers a agenda for enhanced Australia-Japan multilateral cooperation organised around:
- support for American global leadership, and
- reforming post-war multilateralism.
Three areas of international policy are particularly well suited to closer Australia-Japan cooperation in pursuit of these goals: climate change and energy security; nuclear non-proliferation; and official development assistance.’
I have some doubts about these two foundational principles, especially over the mid- to long-term, given America’s own longstanding ambivalence about multilateralism, and its relative decline particularly since the GFC. In the short term, however, it seems worthwhile to think more deeply and creatively about three of their seven specific recommendations:
‘- Leverage APEC and the East Asia Summit more to act as caucuses in multilateral bodies like the WTO …
- Better coordinate Australian and Japanese aid policies and programs …
- More ambitiously, develop and pursue an Australia-Japan agenda for reform of the multilateral system.’ (p2)
[Originally posted, with full hyperlinks, at http://eastasiaforum.org/author/lukenottage/]
For weeks I have been tracking this latest evolving food safety scandal, but reports and reactions vary markedly across the region. Media coverage is likely to remain disparate. But the saga should provide lessons for developing bilateral and regional infrastructure to “trade up” to a more harmonized regime, better securing consumer product safety in our FTA era.
At a news conference this Wednesday the Chinese Health Ministry announced melamine limits for dairy products, but declined to provide updated statistics on those so far harmed by tainted products. In September the figures given were 53000 children sickened, 13000 hospitalised, and at least three dead from kidney stones due to drinking products made from milk that suppliers or intermediaries had bolstered with this chemical to hide the fact it had been watered down. Yet the government demands notification if Chinese lawyers decide to represent victims.
[Originally posted, with full hyperlinks, at http://eastasiaforum.org/author/lukenottage/]
As an Australian/New Zealander lawyer who has spent almost eight years on and off in Japan since 1990, I am concerned that both sides tend to adopt internally inconsistent positions on whaling. What can the law add to this controversial topic?
Kent Anderson rightly points out the Japan reveals a major “blind spot” in underestimating antipodean objections nowadays to commercial whaling. But some Japanese commentators are all too aware of those objections; it’s just that they think them to be hypocritical. That is, when Australia brings claims against Japan under the WTO (or potentially, soon, under our FTA), it insists that any measures impeding its agricultural trade need to be based on science and economics, not the cultural values invoked by Japanese farming communities or their politicians and bureaucrats. Yet when whales are at stake, Australia insists that this is not about science and economics. The ethics involved in killing or keeping alive these magnificent mammals become a major factor – increasingly, it seems, a definitive one. Japanese commentators tend to see this as a double standard, which is why some of them delight then in highlighting kangaroo culling or ethically debatable farming practices in Australia.
But the Japanese government’s position is also inconsistent. When it defends WTO claims, at least to its own citizens, it invokes culture and ethics. Yet when it comes to whaling, the government and the media focus instead on economics and science. A major reason for this double standard, but also Australia’s, is local politics. Rural communities retain disproportionate voting power in Japan, while an anti-whaling stance plays into growing public concerns about other environmental issues in Australia.
How can the law help in such tense situations?
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- Submission to the Senate Inquiry into the Commonwealth’s Treaty Making Process
- Enforcing Product Liability Law
- Product Liability: Complementing Substantive Law Reforms to Enhance Incentives to Supply Safe Consumer Goods
- Consumer Product Safety Regulation – Recalls and Accident Information Disclosure Mechanisms
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- Do Many of Australia’s (and Some of Japan's) Treaties Not Give Full Consent to Investor-State Arbitration?
- Bill proposing to preclude Australia from ISDS in future investment treaties
- 12th ANJeL Japanese Law conference: Cairns, 16 May
- Consumer Protection Law and Practice in South-East Asia: Implications for Regional FTAs and Australia